Bill Gates said in an interview with German Newspaper Frankfurter Allgemeine Zeitung that Microsoft is not planning a smartphone to compete with the Apple iPhone.

Microsoft did choose to put some hardware in the music player business with Zune to compete with Apple as their previous attempts to deliver just the software did not work.

The situation in the smartphone business is a bit different. Microsoft' mobile OS is rather established in the smartphone sector and it would piss off too many mobile phone makers if Microsoft decided to make their own smartphone hardware.
The full interview with Bill Gates is in today's print edition of the FAZ. The online excerpt (German) does not feature Bill Gates statement in regards to the iPhone. Via Reuters.